Regulatory Alerts2026-05-26
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Governor's Testimony before the Finance Committee on Monetary Policy 2025
Issued by Erik Thedéen, Governor of the Sveriges Riksbank, to the Swedish Finance Committee on 26 May 2026, this report details the 2025 monetary policy framework and confirms that three gradual policy rate cuts to 1.75% were implemented to counter temporary tariff-driven inflation and support a weak but recovering economy. The document establishes that underlying inflationary pressure remained aligned with the target, long-term expectations stayed stable, and the central bank maintained a forward-looking, steady course despite significant global trade uncertainty and exchange rate volatility. It further underscores the robust institutional support for the Riksbank’s independent decision-making, Sweden’s sound public finances, and the ongoing methodological development to integrate fiscal policy effects into future economic forecasts.
Erik Thedéen, Governor of the Riksbank Report on Monetary Policy 2025 Finance Committee, 26 May 2026
2025 was a dramatic year globally Trade Policy Uncertainty Index Note: Trade Policy Uncertainty is a normalized index of the number of US news articles mentioning trade policy uncertainty. A value of 100 means that 1 percent of articles concern trade policy uncertainty. Source: Economic Policy Uncertainty.
Monetary policy went through three phases in 2025: • Calm start to the year • Tariff turbulence • Slightly greater clarity
New American tariffs
Elevated inflation during 2025 HICP and HICP excluding energy Note: Annual percentage change. Source: Statistics Sweden (SCB).
• Inflation rose at the beginning of 2025. • A key and difficult-to-assess question was whether the elevated inflation was due to temporary factors. • Underlying inflationary pressure was in line with the target.
The Swedish krona strengthened during 2025 Krona development against the US dollar and the euro Note: A lower value indicates a stronger exchange rate. Source: Sveriges Riksbank.
• The krona strengthened primarily against the dollar but also to some extent against the euro. • Reduced interest in US assets and increased interest in Swedish assets may have played a role.
The economic landscape changed during the year Riksbank's GDP forecasts for 2025 Note: Annual percentage change. Refers to forecasts and outturns for actual GDP (not calendar-adjusted values) for the full year 2025. Sources: Statistics Sweden (SCB) and Sveriges Riksbank.
Confidence indicators in the Business Confidence Survey Note: Index, mean = 100, standard deviation = 10. Seasonally adjusted data. The confidence indicators are calculated as the average of the net totals for a number of questions concerning the current economic situation and future prospects. Source: National Institute of Economic Research (Konjunkturinstitutet).
Low household confidence
The labour market developed weakly Unemployment Note: Percentage of the labour force. Seasonally adjusted data. Refers to persons aged 15–74. Solid line refers to outturns and dashed line refers to the Riksbank's forecast from December 2024. Source: Statistics Sweden (SCB) and Sveriges Riksbank.
Employment rate Note: Percentage of the population. Seasonally adjusted data. Refers to persons aged 15–74. Solid line refers to outturns and dashed line refers to the Riksbank's forecast from December 2024. Sources: Statistics Sweden (SCB) and Sveriges Riksbank.
The Riksbank gradually eased monetary policy Policy rate Note: Percentage. Source: Sveriges Riksbank.
The Riksbank lowered the policy rate three times • Temporary elevated inflation • Monetary policy was forward-looking and maintained a steady course.
Policy rate 1.75%
Inflation returned to target by year-end Consumer prices Note: Annual percentage change. Refers to HICP for Sweden, HICP for the euro area, and CPI for the US, UK, and Norway. Sources: Statistics Sweden (SCB), Eurostat, US Bureau of Labor Statistics, UK Office for National Statistics, and Statistics Norway.
Policy rates Note: Percentage. Sources: National central banks and Sveriges Riksbank.
The Riksbank's holdings of securities continued to decrease Riksbank's holdings of securities Note: Nominal amount, billions of kronor. Source: Sveriges Riksbank.
Increased focus on central bank independence High public debt in several countries Note: Percentage of GDP. For the US, federal government debt is meant, and for other countries, Maastricht debt is meant. Sources: Bundesbank, Eurostat, French National Institute of Statistics and Economic Studies, and US Congressional Budget Office.
• Solid support for the monetary policy framework and for the Riksbank to make independent decisions. • Sweden has good control over public finances – it is important that this is maintained.
Monetary policy was forward-looking • Relatively good target achievement with moderate deviations in inflation from the target. • The elevated inflation was due to temporary factors. • Long-term inflation expectations were stable. • The economic situation remained weak but turned upward during the year. • The Riksbank lowered the policy rate to support the recovery and to ensure that inflation would reach the target in the long run.
Comment on the evaluators' remarks • The scenarios are a valuable tool, especially during periods of high uncertainty. • The Riksbank is developing methods to take into account the effects of fiscal policy in the forecasting work. • Monetary policy needs to take into account the development of the exchange rate, despite considerable uncertainty.
Erik Thedéen, Governor of the Riksbank Report on Monetary Policy 2025 Finance Committee, 26 May 2026